Businesspeople Speak Out Against B&O Tax Hike

Council Sends Matter Back To Committee, Delays Implementation

September 26, 2012

The special meeting held Sept. 20 about the business and occupation tax increase that New Martinsville City Council adopted at their Sept. 10 meeting was attended by approximately 50 businesspeople-all speaking against the measure.

Wetzel County Chamber of Commerce President Don Riggenbach spoke first on the issue, particularly taking exception to the lack of awareness about the increase. A statement from the chamber after the adoption said, "We also acknowledge that the City of New Martinsville met the minimum requirement to notify the public of the Sept. 10 second reading of the proposed increase of the B&O tax. But, meeting the minimum requirement resulted in no members of the business community being present at the meeting to discuss this increase."

"As you can see, once we did find out about it in other ways, people are here and are concerned," said Riggenbach. He suggested maybe the city should have slipped a note about the matter in the B&O tax bill for the previous quarter.

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Further, of the fact that the city hasn't had a B&O tax increase in 35 years, Riggenbach said, "Number one, that's not our fault. Yes, you deserve an increase. It's just the amount of the increase that I'm really concerned about."

The rates increased by 250 percent in several categories including manufacturing, retailers, wholesalers, contracting, amusement, services, rentals, and banking. Businesses such as gravel, sand, hotel occupancy, and utilities did not increase. Recorder Bonnie Shannon said those that did not change were already set at the highest level allowed by law. The increased rates range from 15 cents to $2 per $100 gross sales, up from six to 80 cents per $100.

"It's very big and it's very significant," said Riggenbach, saying even though an increase by a matter of cents does not look big, it adds up. For him, he said $6,000 per year must come off his budget.

In closing Riggenbach asked the business people in attendance to make the meeting an education, not a shouting match. The meeting that followed adhered to that advice as nearly every person in attendance took the opportunity to speak, as offered by Mayor Keith Nelsen.

Sandy Hunt of Secondhand Rose said 20 years ago informing the public of matters through the required newspaper legal advertisement and posting it on the front door were fine. However, nowadays there are other ways of communication. "This is the second time this has happened in a year," said Hunt, a similar lack of public knowledge about a matter existed until after council took action.

Mike Cunningham of Valley Plumbing and Electric said that while notifications are a concern, he was more bothered by the retroactive nature of the tax. The rates were to be effective July 1.

He also wondered how the city determined that much of an increase was needed. "It seems like it was in comparison to other cities, not what we need," said Cunningham. He suggested that businesses would be more competitive if they could keep rates lower and ultimately bring more people to New Martinsville.

Dan Witschey of Witschey Contracting said of the tax, "We're penalized because we're working in the city." Also concerned by the retroactivity of the tax, he said if he was building a $300,000 home, then the B&O tax would have jumped from $2,400 to $6,000. "Now I've got to go back and I've got to eat it," he said.

Nelsen said the city has now researched the matter and it would not be retroactive.

Shannon said a class action lawsuit existed that said a new rate had to start at the beginning of a fiscal year, July 1. But, she continued, "It was overturned and any taxes levied may be made operative of the first day of the then current fiscal year or any date thereafter." She now believes it will be Jan. 1 before it would go into effect, since council sent the matter to committee to revisit.

"Instead of such a rate shock, why can't we do it incrementally over 4-6 years?" asked Witschey. He further noted that he has to compete against people who sneak into town, do a job, and leave. They don't have to get a license, building permit, or pay B&O taxes, yet he has to compete against them.

Brian Rogers of Radio Shack said he understands the need for an increase in rates, but he wants the scope to be completely understood. He said $100 is not a real number to look at for a business, but perhaps council should consider the taxes on $100,000. At that number, Rogers said, "You're lucky at the end of the day if $6-7,000 is actual profit." Yet the increase would have the City of New Martinsville taking $500 instead of $200-and that's before the state and federal government take they're portion. "It's not just 50 cents, it's more like $6 off of every $100."

Brian Litten from Dale's Repair and Service agreed, saying, "It's a big difference for everyone." He added that probably more members of the general public would be at the meeting if they understood the increase would raise the cost of their goods and services.

He also agreed that more notification was needed. "We all pay utility bills. It would be a great way to let people know," he offered. "I think it was kind of a shock."

Matt Herrick of Wayside Furniture said he isn't sure there needs to be an increase. Even though the rate hasn't gone up since 1977, the price of everything has. "So the dollar point of our sales have gone up. The number of retailers have gone up. Every time this happens, the city is getting a raise," said Herrick. "I think the city needs to look a little closer at expenses." That remark was met with applause. That, he said, is where his business looks first when they need more money.

Dave Hunt of Hunt's Painting and Contracting agreed with Herrick. He asked council, "I'd like to know, if you increase this, how many businesses are going to come to town?" Conversely, he knows of a business that moved out of town after the owner realized he needed to pay the B&O tax. "I am opposed to an increase at this time," said Hunt, who said his wife opened up a new business, La Pasta Bella, but she still has to pay the B&O tax on the gross income. "To me, that's unfair."

Diana Cline Powell owns The Flower Basket and Park Laundromat and Car Wash. She said if she had known 31 years ago what she knows now, she wouldn't have even gone into business. "I work my butt off and every year it's a struggle," said Powell. "I don't know how much more my flower shop, as a retail business, can take.

Despite the struggle, Powell is still committed to New Martinsville business, "If I need to buy something, I buy in this town. I don't care what the price is. I don't ask. I don't bicker. I buy in this town."

As for her laundromat and car wash, she said her expenses are set, she can't cut anywhere. Also, since it is a coin operated business, if she needs to raise prices to make up for the increased tax, it has to be by 25 cents.

Fran Caldwell was one of the few non-business people in attendance. But while she isn't in business now, she and her husband Harry owned and operated the Dairy Queen for years. It was during that time that the B&O tax was instituted. She remembers how there was a standing-room-only crowd at that public meeting when she believes Howard Jeffers was mayor. "The city needed money because they had overspent," recalled Caldwell. The business agreed to accept the tax for one year to bail out the city. "Well it never went off, it just kept going," she said. "Businesses support so many things in the community. How can they support extra activities (if their taxes increase)?" asked Caldwell.

Another concerned citizen, Fawn Price, said any time a business raises prices of what they're selling to cover an added tax, she thinks that contributes to inflation.

Prosecuting Attorney Tim Haught, who is in the process of closing his private practice and serving full-time as prosecutor, said his main concern was the retroactive nature of the increase. "As I look around this room, I see an lot of people who have supported an awful lot of community activities," said Haught. "Here's the problem. Small businesses are being squeezed. And they're being squeezed in this town too." Fuel, food, and other costs have gone up. "There are a lot of small businesses in New Martinsville who operate on an extremely small profit margin," said Haught. "The people you think are making lots of money are not making lots of money." The audience burst into applause at that statement.

He further noted that since he has government experience, he appreciates the problems the city has. "I'm really thankful that you're not making it retroactive," he concluded.

Bart Cannizzaro of the Academy for Dance and Theater Arts simply said of his new business, "We're a year in and we can't raise our prices." His wife and business partner, Clare Cannizzaro suggested maybe the city look at a different way to calculate the tax, perhaps just on profit. She further said, "I would hope that the city wants to make the city enticing to other businesses."

John Charles Mensore of J.C. Mensore Distributor, said when he got an email about the tax increase from Riggenbach, "It set off a panic button. I didn't even fully understand what a B&O tax was." When researching the tax, he found that only the states of Washington and West Virginia even have this tax. "The reason is, it's not attractive to business," said Mensore. "We all need each other. Just because your gross receipts have gone up, it's not going into somebody's pocket somewhere."

The business people applauded when Mensore said, "Sometimes we stay in business to keep people employed. But when things start pouring at you like this, or Obama getting re-elected, it gets to the point that you might have to let people go and that's really the last thing you want to do."

John Figel of Bee Electric said he is one of five people from Sardis who own the business on Main Street. They decided to keep the business in New Martinsville because they've always bought everything in New Martinsville and, he said, "We like it here." However, he said of the B&O tax, "It's hurting. It's hurting me bad." He brought a copy of the business' financial statement and B&O tax if anyone wanted to see it. "Anything you can do to decrease the burden or make it easier to adjust would be appreciated," he told council.

Nelson Hachem, owner of McDonald's in New Martinsville and St. Marys said he moved here in 1982. "I love New Martinsville," he said, "The city has been great to me and my family."

"We all need revenue-everyone in this room needs revenue," said Hachem. The city knows what kind of revenue they need. He added, "I also hope you have put a pencil to paper to find out how much they will achieve by raising the B&O tax." He added that it is backward to look at the maximum increase allowable and then see how much the city will get. "I hope you're balancing your budget as we balance ours," said Hachem.

"We all spend a lot of money on a lot of things that are not necessary to run our business, but we do it because we want to be a good neighbor," said Hachem as the audience applauded. "The city needs to allows us to be good neighbors, as the city needs to be a good neighbor."

Finally, he noted that the B&O tax is not relative at all to profitability.

Charlie Stout of Country Roads Ford offered an example along the lines of Herrick. He said in the 1970s a new vehicle cost about $3-4,000. That same level of vehicle now sells for $30-40,000. "So the B&O has increased much more than 250 percent," said Stout. "Right now we eat that $60 (B&O tax) on the $30,000 machine. If it increases to $150, then you all will probably go across the river to save that $150."

Jay Cunningham, DDS, went to a Rotary meeting and was surprised to hear of the B&O tax increase. "I don't understand how that was kept so quiet," he noted.

Shannon said she would like to clear up a rumor that some large businesses are exempt from B&O taxes thanks to a location incentive. "Wal-Mart pays taxes like everyone else," said Shannon. "They are a big part of what we get." They were never exempt. Only Infocision had a possibility to be exempt if they employed so many local residents, but that never materialized.

Elliott Grisell of Grisell Funeral Homes said he sits on Glen Dale's city council, so he understands that sometimes hard decisions need to be made, but he said this decision by New Martinsville council is detrimental. "We're taxed enough already, there's no doubt about it," said Grisell, who incited applause among the businesspeople in attendance.

"In my opinion, I think some businesses will close at a tax this drastic," said Connie Grisell. "I'm just afraid we're going to lose businesses in New Martinsville and lose businesses that may come." She said taxes are certainly a factor for them when determining where to locate their business.

Optometrist Neill Marshall simply said, "I think it's too much. Why not let other people, the population, help out somehow?" He suggested the city look at doing away with the tax completely, but if a raise is needed, at least implementing it in small steps might help. He also noted that he has never been in a group the size of that at the meeting where all of the parties were in one accord on an issue. Such solidarity, he implied, should speak to the nature of the action.

"The B&O tax has not been particularly burdensome at this point, but I can tell you a gross receipts tax is burdensome and even punitive," said David Bridgeman, DDS. He asked council what the tax increase would pay for and what percentage of the city's expenses are funded by the B&O tax? The city's annual general fund is approximately $2.3 million with about $775,000 of that coming from the B&O tax-so close to a third of the city's budget.

He said perhaps the B&O tax is paying for the privilege of operating in New Martinsville. "Maybe the city should consider that it is a privilege to have all of these businesses in New Martinsville," emphasized Bridgeman, who was met with applause.

"Is it not the responsibility of all the residents of New Martinsville to fund the city government?" he asked. "How about a residence privilege tax?" Households in the city currently pay $7.50 per month as a city fee. If it was doubled, it would bring in about $240,000-close to the $300,000 expected from the B&O tax increase.

Brenda Lancaster of Tranquility said she makes just enough money to keep her doors open. "If I had to close, it would just break my heart," said Lancaster. "I love this area. I love the people. I don't want to quit."

Dana Hall, owner of the Florentine Arts Center, said when he came to town in 2009 he was looking from Marietta to Pittsburgh for a place to start a business. "I found New Martinsville, I thought, had the most going on for it," he said. "I think New Martinsville has a really bright future." However, he said the city needs to stay on that path and a tax increase is a slippery slope. "You don't want to be perceived that way by potential businesses coming into the area," he said.

"We're sort of in a unique place here," said Accountant Brenda Botizan, noting businesses in New Martinsville support many, many high schools. "We just do it. That's who's going to lose out here. That's going to be the fist thing you give up, because you have to."

She was also curious about the policing of the B&O tax. "You know there are people out there who are not paying their B&O," she told council. "This is going to be the first place people are going to cheat. They're going to under report."

She further encouraged the city to look harder at their own finances. "It's not popular to look at every dollar you have and see how you can do with less," she said, adding that the city needs to "make sure that there's not some area that we can't do better another way, more cost effectively."

She further said that businesses are about to face many financial changes, particularly with the health care issue. "I really feel that if they have to pull back money, it will be peoples' jobs," she concluded.

Mitch Herrick, also of Wayside Furniture, told council, "Everybody in here are the hardest working people." He said government is a business and must be run as such.

To that, Shannon said many of the increased expenses business are facing, the city is facing-health insurance, gas, etc.

At the end of the meeting council voted unanimously to send the new rates for the city's business and occupation tax, adopted at their Sept. 10 meeting, back to committee. That action will delay implementation.

Councilman Steve Pallisco said he was glad to see businesses at the Sept. 20 meeting. He said the only way to know they are wrong is if this kind of thing happens. "I'm not ashamed to make a mistake," said Pallisco. "We've lost a lot of folks in this area." He said the gas industry is not helping all businesses and he agrees that keeping prices competitive will result in more sales.

Riggenbach suggested maybe the council appoint some business people to give input on the committee. Nelsen responded, "It's always open to the public. We don't want to keep anything from anybody."

Committee meetings are required to be posted on the front door of the city building. As of Tuesday afternoon, a meeting of the committee to examine the B&O matter has not be set.

Particularly in response to the community's apparent lack of knowledge of the rate hike proposal, Shannon said she is willing to set up a community notification email of future city meetings and matters. Anyone who wants to be on the list can email her at bshannon@newmartinsville.com.